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B Corp, the necessary revolution of business ethics

Economic expansion at any price is putting our planet at risk, and with it an entire civilisation, we need to change the paradigm. Simply denouncing it is no longer sufficient. In the search for a reason (and a solution), some pioneering businesses have opted to reconsider the notion of economic success to include collective or social gains. These gains should find their place in the heart of every 21st-century business. So it was that in 2006 the B Corporation movement came into being, stemming from the concept of positive impact. 

Living up to its ideals, isn’t this a sign of genuine success?

 

A change in awareness

What do names as different as Natura, Patagonia, Change.org or Tridos Bank all have in common? They have realised that the objectives of a business cannot be solely to achieve maximum profits as quickly as possible or to take pride in being the best business in the world. They have discovered that above all they must transform themselves into the best businesses for the world. With this intention, these businesses have an increased capacity to attract and retain their employees. This ethical twist is the essence of the B movement.

A global movement

As is the B movement, a 21st-century business movement.  Launched with a simple observation: it would be easier to change, in other words, improve, the world, if the economic fabric was aware of its impact on society. Today’s world is governed by the economy, so all change needs to come from the business…

B Corp Businesses are businesses striving to make positive impacts both socially and environmentally, in other words, using the instruments and incentives of the marketplace to answer social and environmental challenges. Today, the B Corp system has transformed into a network comprising over 2,500 businesses (also convincing, their investors and consumers) all linked to the same system of values and requirements. 

In Spain, the process is controlled by the subsidiary B Lab Spain. Interested businesses can attend the presentation seminars, regularly organised by Blab in large cities (they’re called “B Good Day”). They provide the opportunity to understand the basic concepts and exchange enthusiasm and doubts with other entrepreneurs. 

 

How does it work?

According to Juan Antoni Melé from Triodos Bank, put simply “B Corp is a certification like those of fair trade or ecological agriculture, but for the whole business. It answers to the highest standards of performance, transparency and responsibility and translates into a better way of doing business: better for employees, for communities and for the environment.

To become accredited as such, B Corp businesses must simultaneously comply with:

  • High standards of social and environmental performance
  • Meeting the highest standards of legal accountability
  • Meeting with transparency criteria

The origin

It all began in 2006 when the founders of the well-known American footwear brand, AND1, sold their business. Shortly after, the new owners put an end to the social and environmental policies that had been in place since its origin; the disappointment was enormous. The consequence was the creation of B Lab, the non-profit organisation which promotes the B Corporation certificate. Its motto: identify and recognise the best business FOR the world. This will mark a before and after in the history of business ethics.

 

What does it mean to be a B Corp?

The certification process begins with a self-evaluation which the businesses carry out online. Five fundamental points are considered:

  • Management or decision making,
  • The area of employees,
  • Concern for the community,
  • Interest in the environment,
  • Relationships with clients and suppliers.

After completing the report, the system evaluates the business on a scale of 200 points. If the business obtains more than 80 points, a revision can be requested and a set of documentation sent for a team of analysts to verify that the requirements have really been met. The B Corp movement also presents a new management system that looks to measure and process the economic, social and environmental results of the business.

At the same time, the B Corp business must meet the legal requirements by making changes to the articles of association in order to consider the employees, the community and the environment, in a binding manner, when making decisions.

At this point, the business receives the certificate, valid for two years and renewable following a new validation process. With regard to the costs of the certification, the basic rate is 500 euros, as long as the business’s annual turnover doesn’t exceed 150,000 euros. The annual rate increases in accordance with the business’s turnover.

 

What does a business gain from this certificate?

  • What B Corp offers a business cannot be defined as something material. It requires a compromise, but has many advantages:
  • Differentiation and leadership through social and environmental commitment
  • Excellence in the continuous improvement of business management performance
  • Belonging to a community of leading businesses in sustainability
  • Attraction of talent
  • Attraction of investors and capital
  • Benchmarking with like-minded business based on reliable information
  • Visibility and media coverage
  • Discounts on services and products from B Corp businesses

 

A long and thorough process

It is true. The business environment is changing and this wheel isn`t going to stop turning. This we can draw from the growth being experienced by the B Corp movement.

Over 80% of Spanish B Corp companies fit the profile of start-ups and SMEs. They are businesses with a clear vocation of impact from their foundation, which makes things easier. Some multinationals have joined the movement, but for these organisations, it entails a project with enormous internal repercussions as it involves 100% of the business and its subsidiaries. Currently, over 600 businesses are in the process of B Corp certification globally of which 50 are Spanish. Only one is an estate agency.

Can you guess which one?

Here you can find a summary of the B Economy.

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Real Estate News Reflections

The rental bubble

Where are the rental prices going to stop rising? In large cities, they’ve once again reached the record levels of 2007. Working against this situation, which is critical for tenants, the (central and local) governments are trying to ease the problem and once more facilitate access to housing. Will they be able to manage this without explicitly regulating prices?

With rental prices across the country having risen over 15% in a year, are we in the middle of a new real estate crisis affecting tenants? The experts think not, because this time the increase in prices is not the result of speculation, but rather a phenomenon of accelerated recovery following the crisis. The authorities are beginning to act with urgency.

Both in Madrid and Barcelona, rental prices have been rising rapidly for over 5 years (in Barcelona, the overall increase during this period is more than 35%), and is reaching levels comparable to 2007. During this time salaries have not increased, presenting a real problem for access to housing, especially in large cities. Symptomatic is the fact that young employees live in shared flats with colleagues and can’t imagine any alternative to this formula. According to Eurostat, in 2016, 43% of Spaniards renting private properties, spent more than 40% of their earnings on rent, compared with 28% in the EU.

What are the causes of this rapid inflation?

We find, amongst other principal factors, the pressure of a (local and foreign) demand facing a very limited supply. Population density is a clear sign in this regard: Barcelona, with 16,000 inhabitants per Km2, exceeds New Delhi.  Enclosed between the sea and the mountain, it can’t push back its natural boundaries. Another factor is the mobility of the workforce; young graduates, of whom a lot of flexibility is demanded, no longer feel attracted to buy a house. Neither should we forget the phenomenon of tourist rentals which is ever more attractive to owners for its higher returns. It has reached a peak of 15,000 adverts in Barcelona, in AirBnB alone. Finally, we mention the empty housing owned by banks and investment funds (REIT) that don´t enter in the market.

In light of the shortage of affordable housing, emergency measures have been implemented by the Barcelona City Council, the Government of Catalonia and the Government of Pedro Sánchez.

The Barcelona City Council is led by Ada Colau, the ex-spokesperson of the PAH (Platform for People Affected by Mortgages) and a devoted activist of the “right to decent housing”. With this in mind, she set herself firmly against the concept of “hive accommodation” which arrived from overseas, revoking its license. But what solutions are her administration proposing?

Among the priorities: there is a 50% increase over six years in the quantity of subsidized social housing and 72 projects will supposedly add more than 4,500 units of social housing. Furthermore, since September 2018, promoters of residential projects over 600m3 are obliged to contribute 30% of the developed area to price-regulated housing; a measure that has infuriated the professionals within the sector[1].

Additionally, 750 dwellings will be recovered by the direct acquisition or pre-emptive right of the administration (right of first refusal and right of remedy) by May 2019. Finally, the subsidies for integral restoration (a budget of over 40 million euros) are now contingent on the freezing of rental prices by the proprietors. This policy will “protect” around 16,000 homes, and therefore 40,000 inhabitants.

Similarly, the council has launched an advertising campaign to acquire rental apartments to augment the city’s housing pool. Calling upon the citizens’ sense of responsibility, this mechanism promises proprietors subsidies for renovations, as well as guarantees of retail payments (guarantee fund), providing the monthly payments don’t exceed a certain amount (roughly 30% less than the market price).

For their part, MAB (The Metropolitan Area of Barcelona) have finished building a public-private company, to augment the social housing pool.  The entity called “Habitatge Metropòlis Barcelona”, will have 60 million euros for an initial phase of 600 social dwellings.

Furthermore, among the measures planned by the regional Government of Catalonia, is the recovery of the Act 4/2016 (Catalonia housing act) regarding measures to protect the right to housing for people at risk of social exclusion. This act, provisionally suspended by the constitutional court, refers to empty housing which belongs to banks or large proprietors. Finally, to help compensate for the deficit of affordable rental housing, there is a planned injection of 250 million euros to finance the construction and purchasing of housing. In total, there is a budget for the “purchase” of 1,800 units resulting from evictions, in order to regenerate the social housing pool[2].

At a national level, Pedro Sanchez’s government also legislated in mid-December 2018 to protect the tenant[3]. This involved a reform of the LAU (Residential Tenancies Act) which was promoted by the previous Rajoy government in 2013. Among other significant changes, we note the increase in the legal duration of rental contracts, which change from 3 to 5 years, a tacit extension of 3 years, and a restriction of the security deposit to two months’ rent.

On the other hand, in spite of the rumours, the law does not include measures to regulate the rental prices (the imposition of a maximum price per area, as is the case in Paris). For the moment, there is only contemplation of the introduction of a system of monetary incentives to stem the increase in rental prices (a mechanism inspired by what is currently happening in Barcelona).

Conclusion?

We will see if the public authorities’ intervention is able to stem the frenetic increase of rental prices. Following their effectiveness in Northern Europe, some see the creation of tenants’ syndicates as an alternative, but they have only recently appeared in Barcelona. The reality of the market’s evolution is difficult to predict, especially in the knowledge that Airbnb has over 10,000 residences available in Barcelona, while the pool of affordable housing in the city barely reaches a thousand units. Profitability remains a determining factor, especially for property owners who have signed high-rate mortgages.